Business Maverick

Business Maverick

Asian shares search for momentum after US data: markets wrap

Asian shares search for momentum after US data: markets wrap
Traders weigh economic data at the New York Stock Exchange.

Asian stocks struggled for traction, as investors weighed concerns about the health of the US economy against stronger expectations for early Federal Reserve policy easing.

Shares declined in Japan and South Korea, while those in Hong Kong and mainland China fluctuated. US equities futures were little changed. 

Treasuries steadied in Asia after rising on Monday following data that showed US factory activity shrank at a faster pace. The 10-year yields edged up two basis points at 4.41%, after sinking 11 basis points previously. Australian and New Zealand government debt gained Tuesday.

The dollar stabilised after weakening against most of its Group-of-10 counterparts earlier. Asian currencies such as the Thai baht and Malaysian ringgit strengthened.

The mixed picture across asset classes suggests investors may be waiting for more US data, such as Friday’s crucial jobs figures, for more clues about the outlook of the world’s No. 1 economy and its central bank. While the latest soft US manufacturing data revived bets for the Fed to cut rates sooner, it also raised concerns about the potential drag on Asian economies.

“Yesterday was a cracking day for the region, a very big bounce. So we’re searching for fresh impetus now,” said Kyle Rodda, a senior market analyst at Capital.Com Inc. “There’s certainly some weakness in cyclicals after the soft ISM Manufacturing data and that disproportionately impacts Asian stocks.”

Swap contracts tied to upcoming meetings continue to fully price in a quarter-point rate cut in December, with the odds of a move as soon as September edging up to around 50% and November also given high odds.

Traders weigh economic data.

The S&P 500 turned green in the final minutes of trading as a rally in big tech outweighed a plunge in energy producers. A technical issue at the New York Stock Exchange resulted in erroneous trading volatility halts earlier Monday. 

Back in Asia, Japan’s finance minister said the government’s intervention in the currency market a little over a month ago was effective to some extent, in the first official acknowledgment of the action after the ministry disclosed data indicating it spent a record amount to prop up the yen.

Meanwhile, India’s stock futures extended Monday’s surge, as investors awaited the final result of the marathon six-week election that concluded over the weekend. Exit polls pointed to a third term victory for Prime Minister Narendra Modi.

In commodities, oil tumbled as OPEC+ rolled out a plan to restore some production to the market. Bitcoin briefly topped $70,000. Gold held its biggest advance in two weeks, after soft US data reignited optimism the Federal Reserve will cut rates this year.

With the US earnings season mostly in the rearview mirror, traders will focus on whether inflation is cooling or is stuck in a loop that will leave interest rates in “higher-for-longer’ limbo”, according to Chris Larkin at E*Trade from Morgan Stanley. “This week’s jobs report represents the next big test.”

In fact, traders will also be focused on a slew of labour-market readings this week, including Friday’s payrolls figures.

“Additional cooling in job openings this week would also help to bring home the message that the labour market is no longer a meaningful threat for near-term inflation dynamics,” said Oscar Munoz at TD Securities.

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